9.9.16

Oil Price Jumps, Nears $50 per Barrel as US Inventory Drops

• Barkindo meets Saudi, Algeria oil ministers over OPEC’s output cuts
Crude oil prices on Tuesday surged about four per cent after the United
States inventory data showed a drop in stocks to nearly a two-decade low
as crude imports into the US Gulf Coast slid last week due to Tropical
Storm Hermine.

This is coming as the Secretary General
of the Organisation of Petroleum Exporting Countries (OPEC), Mr.
Mohammed Barkindo, will today in Paris, France, meet the oil ministers
of Saudi Arabia and Algeria as part of the renewed efforts to secure a
global agreement to cut crude oil production to ensure the recovery of
prices.

US crude stocks dropped 14.5 million
barrels last week to 511.4 million barrels, the biggest weekly drop in
stockpiles since January 1999, according to the US Energy Information
Administration.

Brent crude oil neared $50 a barrel for the first time in two weeks.
It rose $1.84 to $49.82 a barrel, a 3.8 per cent gain, while the West
Texas Intermediate crude was up $1.83, or 4 per cent, to $47.33 per
barrel.

Tropical Storm Hermine, which threatened
the Gulf Coast refining region last week, scuttled some US oil
production and limited imports and shipping.

Gulf Coast crude imports hit the lowest
levels on record last week, data showed, even though the storm
ultimately did not harm Gulf facilities.

A source at OPEC confirmed the meeting as
part of a push for an output deal with producers battered by a
glut-induced halving of oil prices over the past two years.
“There is a strong move towards a deal between OPEC and non-OPEC members
to at least freeze production,” an OPEC source told Reuters.

“It seems we are going in this direction.
But if we are going to freeze, we have to use secondary sources to
gauge production levels. We can’t allow each country to use a different
method,” the source said.
“Iran must agree to be in line with other producers and use secondary sources.”

Tehran has said that it supports any
measures to stabilise the market. However, it has stopped short of
indicating whether it would join a global deal before its production
reaches 4 million barrels per day, the level it was pumping before the
imposition of Western sanctions in 2012.

The sanctions ended in January this year.
Iran has been the main factor preventing an output deal between OPEC and
non-OPEC Russia as Tehran has said it should be excluded from any such
agreement before its production recovers.

The OPEC source said Iran’s production before sanctions had never exceeded 3.75 million bpd.
Iran has said it is producing slightly more than 3.8 million bpd. It
signalled on Tuesday it was prepared to work with Saudi Arabia and
Russia to prop up prices, although Tehran has begun to bargain with OPEC
on possible exemptions from any output cap.

The OPEC source said major oil producers
were trying to convince Tehran to come onboard, adding that there was an
initial understanding that only Libya could be offered an exemption.
“Now there is a push to smooth things out and solve any problem,” the
OPEC source said, adding there had been no agreement yet on any level at
which to freeze production.

“This will be discussed in Algeria,” the source said.
Algeria is hosting meetings of the International Energy Forum and OPEC on September 26-28.
OPEC and Russia are expected to revive talks for a global deal on production in Algeria.